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Saturday, November 28, 2009

Feds File For Forfeiture Of Durham's Geist Mansion And Other Assets

ACCUSED OF RUNNING PONZI SCHEMEThe federal government filed an action in the Southern District of Indiana on November 24 seeking to forfeit business tycoon Timothy Durham's Geist mansion in Hamilton County, his Hollywood residence and other assets. The federal action filed by acting U.S. Attorney Tim Morrison charges that Durham and others acquired the property in question as a result of federal wire fraud violations that reads an awful lot like a classic Ponzi scheme. The complaint reads:

Timothy S. Durham, and his companies and associates, have been involved in a scheme to defraud numerous persons of money by convincing those persons to buy "investment certificates" . . . from Fair Finance Co., an Ohio company, upon the representations that the money given to buy the investment certificates will be invested in low-risk, high yield, short term consumer debts, and the investors will receive high regular interest payments on their investments. In fact, that money was not invested in the types of investments represented to investors. Instead, the money provided by victims of the scheme was used to make interest and redemption payments to earlier victims of the scheme, thereby lulling the earlier victims into believing that their money was being responsibly (sic), and enticing new investors into the scheme in order to fund payments to the earlier investors.

The federal complaint alleges that Durham wired $84.2 million of Fair Finance's funds to a Fair Holdings account at First Indiana Bank. Durham, in turn, wired those funds to 50 individuals and businesses, including the following:

U.S. Rubber Reclaiming (subsidiary of Obsidian)-$6.9 million

Speedster, Inc. (Durham classic car company)-$5.3 million

Danzer Industries (former parent company of Obsidian)-$1.8 million

RM Auctions-$1.4 million

Champion Trailer-$1 million

Playa Del Racing (IndyCar racing team of Durham's)-$804,000

Pyramid Coach (former subsidiary of Obsidian)-$730,000

Evaco Acquisition Corp. d/b/a Superline Trailers-$690,000

McDonald Investments-$495,000

Car Collector Magazine-$277,000

James Cochran-$30,000

Tim Durham-$100,000

The federal complaint seeks the seizure and forfeiture of the following assets claimed to be the proceeds of various wire fraud offenses:

Tim Durham's Geist mansion, 14353 East 113 Street, Fortville, Indiana

Tim Durham's Hollywood residence, 1227 Sierra Alta Way, Los Angeles

301 South 1st Street, Lewisville, Indiana

1326 Broad Street, New Castle, Indiana

Funds in two accounts at First Merit Bank in the name of Fair Holding

Funds in nine accounts at J.P. Morgan Chase Bank in the name of D.C. Investments, Inc., Fair Finance, Obsidian Enterprises and Timothy Durham

Funds in seven accounts at Key Bank in the name of Fair Finance or Fair Holdings

One 2008 Bugatti Veyron

This latest disclosure doesn't say much for the investigative prowess of our local news media in Indianapolis. Once upon a time, reporters had sources at the federal and local courthouse who could be counted on to tip them off when a case of interest got filed in their court. An Advance Indiana reader e-mailed a link to the Pacer entry for the case in the federal district of Southern Indiana. When the FBI carried out its raid of Durham's offices in the Chase Tower five days ago, reporters were only left to speculate what was transpiring. If they had simply checked court filings at the federal court house one block away, they would have known what was taking place.UPDATE: The paid media is playing catch up now. See stories now at the Indianapolis Star, the IBJ, Fox 59 News, WTHR and WISH-TV. Gee, I wonder who their source was.

(interesting sidenote, there was an identical-looking Veyron driven into a saltwater pool near Galveston TX just a couple weeks ago and video of it just happened to be captured on somebody else's cellphone. The driver was 'unnamed.' Hmmm. Could it be?)

The Veyron consumes more fuel than nearly any larger car (not including buses or heavy trucks), using 40.4 litres per 100 kilometres (6.99 mpg-imp; 5.82 mpg-US) in city driving and 24.1 litres per 100 kilometres (11.7 mpg-imp; 9.76 mpg-US) in combined cycle. At full throttle, it uses more than 115 litres per 100 kilometres (2.46 mpg-imp; 2.05 mpg-US), which would empty its 100 litres (22.0 imp gal; 26.4 US gal) fuel tank in just 12 minutes.

There is no real local journalism in Indpls outside of blogs. All the local TV and newspapers are about are human interest stories, Manual High School, and Christmas shopping. That's pretty much it. These media are basically the PR firms of those in power.

Thanks, Diana, but I don't pretend to be a substitute for a good, independent newspaper. Unfortunately the Star continues to drop the ball. The Indianapolis Business Journal is a more dependable source of quality reporting. During the Wishard fiasco, the Star just acted as a cheerleader, writing five editorials in support of a "yes" vote and ignoring every piece of evidence that might hurt the chances of the referendum passing. It was a disgraceful performance by the Star.

The mainstream media is lame. They should be embarrassed for letting two bloggers with full-time jobs scoop them on such an important story. Makes you wonder what kind of political connections Durham had behind the scenes. I'd like to see a full listing of all the companies he's involved with and who he has given money to. So far I know he's given money to the governor, the attorney general, and Carl Brizzi. Do you think there was a snowball's chance in hell that any of these top Indiana public officials would have gone after him for these alleged crimes? Looks like they were all bought and paid for to me. I wonder what kind of incriminating emails the guy left behind for the feds to read.

Diana,The last report was $280,000.00 to the Governor and over $809,000.00 in total to campaigns and politicians in Central Indiana including Senators, Representatives Federal and State, Prosecutors and Sheriff's campaigns.

The sad part of all of this is there is a far greater fraud against the citizens of Indiana laying there and far more money changing hands than Mr. Durham that has all of the same players looking the other way on that one too! from the top to the bottom!

November 25, 2009 theindychannel.com Politicians Distance Themselves From Indy Businessman Tim Durham Donated More Than $800K To Politicians ...A search of campaign finance records showed that [he] contributed at least $809,653 to candidates and political committees, virtually all of them Republicans, at the local, state and federal levels in the last few years... Gov. Mitch Daniels... received the most Durham money at $280,000. Marion County Prosecutor Carl Brizzi, who acknowledged Durham as a friend, got $178,949 of the financier's cash and services, and had been asked to serve on the board of Fair Financial. ...the state GOP received at least $150,000 from Durham, and the Marion County party and its finance arm got $66,200. ...House [GOP] leader Brian Bosma and his caucus's campaign committee received $54,580. ...[&] donated $5,600 to Democratic Congressman Baron Hill.

I'm curious as to whether he was really operating a Ponzi style scheme or if he just had a lot of failed or failing businesses and was raising money to try and keep them afloat but then didn't scale back his lifestyle as would seem prudent. Or maybe some of his ventures were less legitimate than others.

Playa Del whatever racing was a legitimate Indy Car team that had struggled.

It'll be interesting to follow this as it develops. I agree with the other posts and frequently note to others that Gary and Paul do more investigative style reporting and fact publishing than the main stream media does.

So is anyone surprised that Indiana's top securities law enforcer, Todd Rokita, who's spent considerable taxpayer dollars reminding us of just how tough he is on security law violators, has remained silent from the sidelines while the feds do all the work in the Durham matter?

Paul, Fair Finance's offices were in small towns in Ohio where the customers had no idea who Tim Durham was or that he owned the company. I doubt that people in Indiana were purchasing certificates of investment from Fair Finance.

I would add that the regulated banks in those towns should have been raising questions to securities regulators when they saw how high of interest rates Fair Finance was paying. Usually, if it seems to good to be true, it probably is.

Rokita has very limited jurisdiction, Paul. I've seen no evidence that he shirked his responsibility. If it becomes apparent that he did, I will be the first to call him out on it. The people who fell down on the job were the Ohio securities regulators, who failed to enforce their own laws. They were very dismissive of Greg Andrews' report when it came out in October. If the FBI hadn't become involved, I doubt that Ohio would have held up the latest securities offering. So much for Democrats being tougher on securities enforcement than Democrats. That office is run by the Democrats in Ohio.

The same lack of oversight could be said of the SEC. There was litigation by other investors in his publicly-traded companies that suggested something was highly amiss. Why was the SEC slow to act? They nailed his buddy Dan Laikin at National Lampoon last year. Laikin had to be a bit player.

If Durham offered the investment /in/ Indiana or /from/ Indiana, Rokita has jurisdiction. The Securities Act is clear and comprehensive.

I'd like to see leadership from Rokita demanding that every dollar of ill-gotten funds received by Mitch and other Republicans be returned to Durham's accounts to be distributed to investors in a rescission and/or receivership proceeding.

Unless Rokita makes such a demand, the Republicans will enjoy and continue to serve in their offices due to elections won on the backs of swindled investors.

I would hope that the Republicans wouldn't need to be told to do the right thing here.

Durham's offerings were likely exempt from SEC registration under what's called "Regulation D" or "Reg D," as it's commonly known.

Being presumptively SEC-exempt, the SEC wouldn't have cause to look at the offering until they were aware of conduct that violated the exemption.

Rokita, however, has the ability to look at all Reg D offerings, as these offerings are required to be filed with his office. It was certainly within his jurisdiction to yank the exemption of Durham's offerings and to have a receiver appointed.

Rokita's office was made aware of what was going on. But, in fairness to Rokita as Welch correctly points out these were OHIO offerings and thus Rokita had no jurisdiction although he certainly could have picked up the phone and made some calls.

I do applaud the Ohio Department of Securities for stepping up and saying NO. Too often those in government who make mistakes don't want to accept accountability and stop any future mistakes. It is obvious Ohio has accepted this premise and as such, will learn from this humiliating episode and hopefully this will not happen again.

In the interim I hope the Indiana Bar immediately suspends Tim Durham's law license, and I hope that anyone who knows where Durham has cash stashed calls the local FBI office. It's incumbent upon all of us to do the right thing and help those folks in Ohio get their money back as soon as possible.

With all due respect, it is exactly wrong that Rokita had no jurisdiction over Durham's activities.

As I wrote earlier, if Durham offered /from/ Indiana or /to/ Indiana, Rokita had jurisdiction, and the Sec. Div. could have filed an immediate Cease and Desist action with concomitant Administrative Complaint.

Durham could then head to Superior Court and plead that his offering was entitled to an exemption, but the burden of proving an exemption is on the one claiming it, and the exemption is always overcome by fraud. Rokita's C&D orders are not quickly nor readily quashed.

As Paul rightly pointed out, given that the FBI raided Durham's Indy headquarters, activities related to the investment likely occurred in Indiana. Consequently, if Durham was committing any impropriety with regard to his offering, Rokita had jurisdiction.

Further, Rokita's Sec. Div. is presumed to have jurisdiction over any actions it files, at least for the moment, for the benefit of investors.

A judge can certainly toss out Rokita's action after some facts are proffered, but Rokita's attorneys are given a wide berth, a principio, so that questionable actions can be halted and investor funds safeguarded. The risk of harm from stopping an investing scheme is seen as comparatively low when measured against the harm that could result from the dissipation of client funds.

Rokita has the bully pulpit, and the Securities Act broadly empowers him to protect investors. Judges will, far more often than not, let Rokita's attorneys have their space.

It is my understanding that Fair Financial could only sell to Ohio residents.

One thing that continues to bother me is Brizzi's brief stint on the board. Was he appointed to replace someone? A certain number of members of a board are supposed to be "independent" or "uninterested" parties, which was what was intended of Brizzi according to the media accounts. How many of the others have hidden ties? I've researched to find a list of current board members with little luck.

Also, this guy pledged $250,000 in 2006 to a Girl's Club building fund in Seymour, with the money to be distributed on an annual basis. I'm guessing that a number of charities will be getting short-changed.

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